Ministry says bauxite projects likely to incur initial losses

A view of the Tan Rai bauxite mine in Lam Dong Province. Two bauxite mining projects in the province are set to face losses for several years. — VNA/VNS Photo

HA NOI (VNS) — The two bauxite mining and processing projects in the Central Highlands Province of Lam Dong, which became operational in October 2013, would incur losses for four to five years.

This was revealed by the Ministry of Industry and Trade (MoIT) in a press statement released to the media on Monday.

The ministry said an assessment conducted by the National Assembly Standing Committee of the two projects from October 2013 to April 2014 showed that the projects had positively impacted the surrounding localities' infrastructure development, economic structure transition and labour.

As per the committee's calculations, the Tan Rai bauxite mine would report losses for four years, while the Nhan Co mine would do the same for five years, as they both had to repay loans taken during the initial period. The maximum time allowed for capital repayment would be 12 years.

In addition, selling prices of aluminium in the world market were seeing a growth trend. Due to this, the projects' effectiveness would be higher, and they would quickly recover the losses, it added.

The ministry added that the designed capacity of the mines was 600,000 tonnes a year.

The Viet Nam Coal and Mineral Industries Holding Corp (Vinacomin) had proposed to boost the capacity to 650,000 tonnes a year and stabilise operations at 630,000 tonnes a year.

The Government has also approved the Dak Nong Power Plant or Aluminium project (aluminium smelting project) invested by the Tran Hong Quan Trading Ltd Co in the Nhan Co Industrial Zone that would raise the economic effectiveness of the aluminium project.

The ministry also rejected reports that said the project was being compensated for a loss of VND3 trillion (US$145 million) a year stemming from electricity being sold to the company at prices that were lower than the current prices.

It added that the company would buy electricity at the tariffs applied to enterprises, not that applied to power sold to households.

"It is because of this reason that the comparison is lame and superficial," MoIT said, adding that the project would have a capacity of 300,000 tonnes a year.

In a document dated April 15, 2014, submitted to the Prime Minister, the ministry had asked the Government to extend support on electricity prices sold to the company for the decade-long period of 2016 to 2025, with VND480 billion ($22.4 million).

The company was expected to contribute to the State budget $190 million during the period.

In addition, the project was located in a problematic area and the company also needed support for land clearance under the current regulations.

Last week, Nguyen Thanh Son, former director of the Vinacomin's Hong River Delta Project Management Unit, said at a meeting on the bauxite projects, which was held in Ha Noi that the Tan Rai bauxite project would incur a considerable loss of $37.4 million a year due to backward technology.